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Indiana lawmaker: Coal-gas plant no longer feasible

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An Indiana lawmaker who opposes a 30-year contract with the developers of a proposed $2.8 billion coal-gasification plant told a House committee Wednesday that the surge in U.S. shale gas production has driven down natural gas prices, leaving synthetic gas projects unfeasible.

Sen. Doug Eckerty, R-Yorktown, also told members of the House Utility Committee that the 30-year contract contains a "financial imbalance" that would saddle Indiana ratepayers with any losses incurred by the plant proposed for the Ohio River city of Rockport.

The House panel heard testimony from Eckerty and several plant opponents, including environmentalists, Indiana Farm Bureau and representatives of Evansville's Vectren Corp.

Supporters of the plant also presented their case against a bill Eckerty is sponsoring that would direct the Indiana Utility Regulatory Commission to review the project and the 30-year contract between plant developers Indiana Gasification LLC and the Indiana Finance Authority.

Under that deal, the state agency would buy the company's synthetic natural gas and resell it on the open market. Indiana utility customers would receive discounts or increases on their bills, depending on whether those gas sales make a profit or a loss.

The 30-year deal would tie 17 percent of Hoosier gas users' bills to the Rockport plant's rate.

Eckerty said much has changed since the project was first proposed several years ago at a time of high natural gas prices.

He said the nation's booming shale gas market, where hydraulic fracturing, or "fracking," is used in drilling for gas has driven down natural gas prices for the foreseeable future. Eckerty said similar coal-gasification projects in Illinois, Mississippi and Louisiana have been canceled or revised to eliminate synthetic gas as one of their products.

"What does it say to you that nobody is willing to finance this project unless the utility ratepayers in Indiana are saddled with losses for potentially up to 30 years?" Eckerty asked the committee.

Mark Lubbers, the Indiana project manager for the coal-gasification plant's financier Leucadia National Corp., told the committee that natural gas rates are historically volatile and therefore difficult to predict and that the shale gas boom isn't sustainable.

He said Leucadia National would be lining up about $700 million in private equity for the plant and taking a big risk in building the plant to produce synthetic natural gas, or SNG.

"We only get to make money if SNG costs less than the market price for natural gas. We're literally betting our entire company on our belief that we're right about gas prices. Otherwise we don't get a return," Lubbers said. "We only get paid if ratepayers do well."

Indiana Gasification partner Bill Rosenberg told the committee the plant his group wants to build "would be the cleanest plant ever constructed." He said the plant converting coal into synthetic natural gas would remove numerous pollutants such as mercury that plants which burn coal for power release into the atmosphere.

"This is the future, if there is a future for coal," he told the committee.

The Indiana Court of Appeals last year overturned approval of the 30-year contact by the Indiana Utility Regulatory Commission because of a technical flaw, but the appeals court declined to review the deal. The plant's supporters and opponents have asked the Indiana Supreme Court to review the contract.

If the high court rules against the deal, Eckerty's legislation would send the deal back to the IURC for another round of reviews.

Kerwin Olson, executive director of the consumer advocacy group Citizens Action Coalition, told the House panel he rejects the contention of the plant's supporters that it would diversify Indiana's energy portfolio. He said the plant would continue Indiana's reliance on coal for energy and saddle ratepayers with higher bills.

"This deal is without question the epitome of the government picking a winner and picking a loser," he said, adding that ratepayers would be the losers and the project's developers the winners.

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  • stranded asset = day 1 liability
    Renewable sources have zero fuel cost and have already reached parity cost with burning plants. Far less in fact when you include hidden costs of the burners. This would be a huge stranded asset from the first day it is switched on. I guess that makes it a liability from the day it is approved. Who makes decisions like that?
  • Corporate Welfare Queens
    How can the governor want to lower taxes and be for this disaster? This is a waste of money. Utility customers don't need this risk!
  • EPA regulations
    Wonder how much of this has to do with the new EPA regulations that are shutting down all the coal plants and is a "you pay for it , no you, you first scenerio".
  • Another Daniels Failure
    This was totally a Mitch Daniels admin initiative. Same for the now completely failed Richmond Carbon Motors...same for dozens of other "projects" that Daniels announced with such fanfare. And we need to pass law that IEDC must show that they are actually doing? They are government agency for heaven's sake.
  • Just say no to corporate welfare
    Corporate welfare. If supporters want this plant, they should reach into their pockets and build it. If not, they should crawl back under their rock.
  • Truer words...
    "What does it say to you that nobody is willing to finance this project unless the utility ratepayers in Indiana are saddled with losses for potentially up to 30 years?" Exactly. Privatize profits, push costs onto the public. Corporate welfare at its finest.

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  1. The $104K to CRC would go toward debts service on $486M of existing debt they already have from other things outside this project. Keystone buys the bonds for 3.8M from CRC, and CRC in turn pays for the parking and site work, and some time later CRC buys them back (with interest) from the projected annual property tax revenue from the entire TIF district (est. $415K / yr. from just this property, plus more from all the other property in the TIF district), which in theory would be about a 10-year term, give-or-take. CRC is basically betting on the future, that property values will increase, driving up the tax revenue to the limit of the annual increase cap on commercial property (I think that's 3%). It should be noted that Keystone can't print money (unlike the Federal Treasury) so commercial property tax can only come from consumers, in this case the apartment renters and consumers of the goods and services offered by the ground floor retailers, and employees in the form of lower non-mandatory compensation items, such as bonuses, benefits, 401K match, etc.

  2. $3B would hurt Lilly's bottom line if there were no insurance or Indemnity Agreement, but there is no way that large an award will be upheld on appeal. What's surprising is that the trial judge refused to reduce it. She must have thought there was evidence of a flagrant, unconscionable coverup and wanted to send a message.

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  5. http://www.abcactionnews.com/news/duke-energy-customers-angry-about-money-for-nothing

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